APPLICATION OF GAME THEORY IN DETERMINING GENERAL INSURANCE PREMIUMS FOR HOMOGENOUS PRODUCT
Normally, a credible insurance company will use its past experiences to determine its products' premiums. However, a new problem arises when there is a new company in the market who wants to determine its products' premiums. How can this company determine them while it doesn't have en...
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| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/29039 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Normally, a credible insurance company will use its past experiences to determine its products' premiums. However, a new problem arises when there is a new company in the market who wants to determine its products' premiums. How can this company determine them while it doesn't have enough past experiences? One of the alternatives is to take consideration of competitors’ premiums for products alike. Furthermore, general insurance products are relatively identical. Therefore, the products’ premiums will most likely influence the consumers’ preferences towards the general insurance companies. Certainly, a company cannot directly set its premiums as it has to deliberate whether the premiums can maximize its profit and cover all of its expenses. Game theory is applicable for this kind of situation. In addition, for calculating the optimal premium-which will maximizes the company’s profit-Nash Equilibrium can be used. |
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